On the Horizon:
Debt Disclosures

In the coming weeks, the GASB is poised to issue final guidance on debt disclosures, including direct borrowings and direct placements.

Some governments are turning more frequently to bank loans and other forms of direct borrowing in lieu of publicly issuing municipal bonds. GASB disclosure requirements for direct borrowings and direct placements are just as rigorous as they are for other types of debt offerings including bonds. However, direct borrowings and direct placements may contain provisions that are not present in publicly-issued bonds but are therefore essential for users to know about.
 
The new guidance will define debt for financial reporting purposes to clarify which transactions—including direct borrowings—are considered debt (and to distinguish debt from other long-term liabilities). The new Statement also will feature additional disclosure requirements designed to provide information financial statement users need, including:
  • Amount of unused lines of credit
  • Assets pledged as collateral for debt
  • Significant events of default or termination events as specified in the debt agreement and their significant finance-related effect, and
  • Subjective acceleration clauses.
What’s next: The Board is scheduled to approve the Statement in the last week of March. The Statement will be posted to the GASB Website in early April and will be available free of charge.

More information about the debt disclosures project.